The Localization of Select Asian Economies in the Age of Globalization: An Agglomeration Study

Abstract

The world is highly interconnected, and the strength of linkages indicates an economy’s ability to benefit from participation in global value chains. We utilize the concept of agglomeration to measure domestic linkages in a regional context. Using the Asian Development Bank’s multiregional input–output tables and agglomeration methodology, this paper applies a select group of economies’ backward and forward agglomeration indices from 2007 to 2015 and from 2015 to 2022 to gauge the degree to which value added is sourced from and absorbed by domestic sectors, respectively, from a regional perspective. The results reveal that select Asian economies such as Bangladesh, Fiji, Hong Kong, China, Indonesia, Kazakhstan, Lao PDR, Malaysia, the Republic of Korea, Singapore, and Taiwan have increased their backward agglomeration from 2015 to 2022. This suggests that the low-tech manufacturing sectors in these economies are intensifying their use of domestic inputs. Additionally, there are more Asian economies with increasing forward agglomeration indices. The rise in forward agglomeration indicates that the domestic low-tech manufacturing sectors in these economies are consuming more of their own final goods.